We’ve chatted before about the
way knowledge usually trumps information—thanks in part to Warren Buffet’s comment
that his “big secret” was that he was good at “lifelong learning”—and how the consumer
can be overwhelmed by not only the amount of information, but the wide variety
of sources. Unfortunately, having access
to information can be confusing and misleading, and is no substitute for knowledge!
Along those lines we noticed a recent article in the Inman News that addressed all those
“Zillions-for-us-timates,” “Truli-wrong-imates,” and other machine-generated
(computers are still machines, aren’t they?) prices for homes that drive us all
crazy whether working with a seller or a buyer. Well, guess what, Standard
& Poor’s did a study and found that many of these “automated value models,”
or AVM’s, can be wrong by up to 20%! Wow, that’s a huge difference—try
explaining that margin of error to someone with a $500,000 house that’s really
only worth $400,000, or vice versa—and of course we professionals are the ones
who end up having to clarify the realities of the market to our clients who
have been misled by these flashy snake-oil prices.
So, how do we make sure our clients—especially those sellers who
are trying to keep up with a yoyo of a market like we’ve seen this year—best
understand how and where to price their house to maximize the probability of an
optimal sale price and a successful closing?
The Inman article had
some great ideas!
First, we can remind our clients—and in general everyone we chat
with on the golf course or over a cigar—how misleading and just plain wrong all
these AVM’s really are. That 20% figure is gigantic and no professional worth
their salt would ever make such a pricing error (we would hope!) So use that
stat and remember that friends don’t let friends surf and price.
Second, while this is probably obvious to we professionals, it’s
worth making sure our clients know it as well, and that’s all the
non-mathematical and even human elements that go into the price at which a home
sells. We all know this from our years of practice in the market. Bottom line,
the price to be paid for any individual house is based, yes, on some review of
comparable sale prices, but is mostly impacted by the individual circumstances
of the buyer and seller as well as the hyper-specific (sorry for lapsing into
the latest jargon!) aspects of the house, ie, the condition, décor, lot, and
location. Even Einstein couldn’t develop an algorithm that would consider ALL
of these elements!
Finally, and this is where we come in, only a human, and frankly
only a dedicated professional who has the resources and the time commitment to
dig into all those non-mathematical aspects of the value of a particular home,
can provide as accurate as possible an estimate of a home’s value. As we often say, each property is unique, so pricing a home is as much an art as it is a science. That's where our knowledge and professionalism make the difference!
David M. Hassler
Director of Business Development
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